In the current health care arena, physicians, hospitals, and other health care providers (hereinafter the “Health Care Provider”) contract with health insurance companies, managed care organizations (“MCOs”), or other health insurance providers (hereinafter the “Health Insurance Entity”). Typically, both a Health Care Provider and a patient have a contractual relationship with a Health Insurance Entity. In general, when a patient visits an “in-network” Health Care Provider, the patient receives services which are subsequently billed to the Health Insurance Entity by the Health Care Provider. The Health Insurance Entity is typically the primary payer for services and will cover necessary treatment and care for the patient's various health problems, including acute injuries.
Upon contracting with the Health insurance Entity, the Health Care Provider generally agrees to accept contracted rates set by the Health Insurance Entity (hereinafter “Contracted Rates”). These Contracted Rates are typically lower than the normal, full-rate fees charged by the Health Care Provider (hereinafter “Full Rates”) for the delivery of a variety of billable services. In return, the Health Care Provider is given access to the Health Insurance Entity's patients, some of whom may be assigned to the Health Care Provider. The Health Care Provider also agrees that, during the term of the patient's coverage by the Health insurance Entity, if the patient is to be billed for the Health Care Provider's services directly for any reason, the Health Care Provider can only bill at the Contracted Rates for the services performed, provided that these are services normally paid for by the Health Insurance Entity.
In most Health Insurance Entity/Health Care Provider contracts, the Health Care Provider is prohibited from billing a patient for any amounts attributable to the difference between the Health Care Provider's Full Rates and the Contracted Rates. This type of billing, is known commonly as “Balance Billing” i.e., billing the patient for the balance between the Contracted Rates and the Full Rates). The difference in rates can sometimes he quite large. Thus, while a Health Care Provider obtains some benefits from contracts with Health insurance Entities, certain financial drawbacks exist.
When a patient visits a Health Care Provider for medical attention of injuries, symptoms, or disease stemming from an accident or other event for which there is an applicable liability insurance product and/or an individual, group or business who is determined responsible in a court of law or otherwise, for the patient's injury or reason for obtaining medical attention (hereinafter known as “tortfeasor”), there may be instances when one or more parties other than a Health Insurance Entity, such as a first and/or third party payer as well as compensation paid by a tortfeasor to the patient and/or their Agent may provide payments for the Health Care Provider's services. For example, in the case of an auto accident, the first party payer may be the auto insurance company for any injured individual through an attached medical payment rider, regardless of fault in the accident (hereinafter “Medpay”) or the insurer for any auto insurance rider known as Personal Injury Protection (hereinafter “PIP”). Medpay, PIP insurers and other first party payment entities can be referred to as a first party payer (hereinafter “First Party Payment Entity”). Another example is the patient or their use of an attorney, agent or legal representative (hereinafter “Agent”) in utilizing their health care bills in part or full, so as to obtain a legal judgment and/or agreement with the tortfeasor, allowing for payment to the patient and/or their Agent. An example of a third party payer may be the automobile (or other) liability insurance company for the driver (or other entity) who was “at-fault” or responsible for the Covered Event, e.g. for causing the auto (or other) accident and the injuries for which the injured, non-responsible party received treatment. Third party payers, for example, may include auto insurance carriers, liability, property & casualty and worker's compensation insurance carriers, and other third party payers, among other types of entities (hereinafter “Third Party Payment Entity”). For example, if a patient visits a Health Care Provider because he or she was in an automobile accident, the patient's Health Insurance Entity may be billed, and the patient's Health Insurance Entity may subsequently pay medical bills to the Health Care Provider who provided services to the patient. In some instances, the Health Insurance Entity may elect to seek reimbursement for monies paid for services from a First and/or Third Party Payment Entity who has also paid monies for similar health services, through a process known as subrogation.
However, in many jurisdictions (e.g., states), there is a legal doctrine known as the “Collateral Source Rule” that, allows an injured, patient and/or their Agent to submit medical bills to a First and/or Third Party Payment Entity, even if the bills have already been paid by the Health Insurance Entity to the respective health care provider(s). The Collateral Source Rule prohibits the admission at trial of evidence that a patient's injuries were already compensated from a health insurance policy or other source of compensation. For example, in a personal injury case, evidence that a Plaintiffs medical bills were paid by his or her medical insurance are not admissible. This is largely because the Collateral Source Rule is intended to promote justice and assess remedies for fault of the tortfeasor (the entity or entities that caused the injury).
Additionally, some insurance or other payment sources that pay for an injured party's damages may gain a lien or right of subrogation in any ultimate recovery by or on behalf of the injured party. In these circumstances, the injured patient must pay back the party with the subrogation right, who had previously paid on charges from Health Care Providers), assuming the patient received additional payment for the same billed services by other payment sources other than the party with the subrogation rights.
One problem with this system is that complete and full rate payment may not be made to the Health Care Providers for services performed and billed. Agents and/or injured parties however, can submit the Health Care Provider's medical bills as part of a lawsuit and/or directly to a tortfeasor and/or to a First and/or Third Party Payment Entity and receive compensation at Full Rates, even if the medical bills were already paid. Thus, the Health Care Provider receives payment at the lower Contracted Rates, while the patient and/or their Agent through utilizing the provider's bills, can receive compensation paid by a tortfeasor to the patient and/or their Agent as well as by a First and/or Third Party Payment Entity at the higher Health Care Provider's Full Rates.
Additionally, many Health Care Provider/Health Insurance Entity contracts provide for a waiver of subrogation on the Health Care Provider's part. Subrogation is a legal concept where one entity assumes the legal rights of another entity for whom the first entity has paid expenses or a debt on their behalf. For example, when an insurer is required to pay a claimant a sum of money, the insurer usually is allowed to sue in the name of the claimant against any person who was responsible for the loss. This concept enables an insurance company to sue on behalf of its insured if it is required to pay the insured for a loss caused by another entity. Subrogation is generally considered in most legal systems to form part of the law of restitution by preventing unjust enrichment. In other words, subrogation prevents the subrogor (e.g., the patient) from receiving/utilizing funds from the subrogee (e.g., the health care insurer), and then still claiming the original sum of money from the tortfeasor (e.g., the entity that caused the accident). Pursuant to the waiver of subrogation, the Health Insurance Entity may be able to recover any payments made for services provided to a patient following an auto accident or other Covered Event, provided that the First and/or Third Party Payment Entity paid monies for the same set of services. Thus, even if the Health Insurance Entity receives payment at the Full Rates, the Health Care Provider gets nothing more than the Contracted Rates. In this sense, patients, attorneys and other parties can leverage the Health Care Provider's efforts to financially benefit. for themselves, many times at the full fee rates, while the Health Care Provider receives only the Contracted Rates.
These and other drawbacks exist with known billing practices.